Reaction to Lending Club’s New Credit Model

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The few retail investors discussing the recent change Lending Club made to their credit model weren’t exactly optimistic, according to comments on the Lend Academy forum. Of particular concern is grade inflation wherein borrowers who previously scored a C or lower may now find themselves in the A or B category.

“We expect loan volume to shift toward higher quality grades (grades A and B) because some borrowers will qualify for lower interest rates under the new model,” Lending Club stated in an email last week.

Retail investor sentiment may not be all that important, however, as capital from self-managed accounts on the platform has waned after peaking in the first quarter of 2016. In Q2 of 2017, self-managed accounts only accounted for 13% of the capital used to fund loans. The majority came from banks and institutions.

Last modified: September 13, 2017
Sean Murray


Category: Marketplace Lending

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